The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the assessee failed to prove the audit books under any law and clause (a)(ii) of section 139(1) of the Income Tax Act,1961 not applicable.
Tikona Trust, the assessee trust is a “private trust” and had filed a return of income on 31st August 2018 showing income from business and profession at Rs.1,17,04,178/-. Since the assessee had brought forward losses of the earlier years, it claimed to set off the losses of earlier years against the current year’s income and the gross total income of the assessee was claimed to be Rs. Nil.
The AO/CPC noticed that the returns of income of the earlier years have been filed beyond the time prescribed u/s 139(1) of the Income Tax Act, 1961. The CPC took the due date for filing the return of income by the assessee as 31st July as per clause (c)of Explanation 2 to sec. 139(1) of the Act. The due date of 31st July was extended by the Central Government in some years by notification due to certain unavoidable circumstances.
The assessee had not filed its return of income within the due date prescribed under clause (c) of Explanation 2 to sec. 139(1) or even within the extended period in any of the earlier years. The CPC did not allow set off of brought forward losses. The CIT(A) confirmed the action of AO/CPC not allowing set-off of brought forward business losses against current year business income.
It was observed that CIT(A) has given a clear finding that the accounts of the assessee are not required to be audited under the Income Tax Act or any other law. It was observed by the CIT(A) that there is no legal requirement to get the books of account audited either under the Income Tax Act or the Indian Trust Act in the case of the assessee for any of the relevant assessment years.
Further held that “the case of the assessee does not fall under the ambit of clause (a) of Explanation 2 to section 139(1) and that the due date of filing the return of income specified therein for audit cases does not apply to the assessee.”
A Coram comprising of Shri Baskaran B R, AM and Shri Aby T Varkey, JM observed that the assessee failed to bring to our notice any specific provision under any law which mandates that the assessee’s books of account need to be audited and the assessee is not required to audit its books as per the Income Tax Act or under any other law and therefore clause (a)(ii) of section 139(1) of the Act is not attracted to the assessee’s case. The bench upheld the view taken by CIT(A) that the assessee has to file its ROI on or before 31st July as per clause (c) of Explanation 2 of section 139(1) of the Act.
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